What you need to know about employee data privacy, security, and compliance

Nowadays, gathering and managing employee data digitally is virtually unavoidable—companies need to collect information on their workers to handle payroll and other basic business operations. That said, each type of personal information they collect needs to be processed and stored in a secure and legally compliant manner.

To keep your workers’ personal information safe and sound, you first need to understand which employee data needs protecting. You also have to be aware of the laws and regulations that you must follow, as well as the security measures at your disposal to protect that data. Failing at employee data protection could put your company at financial and reputational risk. We cover all that (and more) in this guide. Let’s jump right in! 

What employee data is subject to privacy laws?

Employers are obliged to protect a variety of employee HR data, generally referred to in the US as personally identifying information (PII). These types of data commonly include:

Employee privacy laws apply not only to your company’s current staff but also to past and prospective employees and job applicants.

Bear in mind that what falls under employee privacy laws will likely vary from country to country or even within countries—for example, US states can have different legislation. Before recruiting and bringing new employees on board, it’s essential to always check local regulations to guarantee privacy compliance.

This is simple with HR software like Rippling, which is built to protect your employees’ sensitive information so you can safely process and manage your staff members’ details through the entire hiring lifecycle.

What are the potential consequences of a data breach?

Data protection laws require employers to demonstrate their dedication to protecting their workers’ personal information. That being said, there are times when a data breach happens accidentally—and the repercussions can be severe. These include:

It’s critical for employers to realize just how prolific data breaches have become in recent years. One of the more publicized incidents of 2023 happened to video game publisher Activision. The company admitted that a hacker accessed their employees’ salary information, phone numbers, and emails by tricking an HR team member through an SMS phishing attack. The company only acknowledged the incident after an external security research group revealed it on Twitter.It’s also worth mentioning that, in order to be penalized, a company doesn’t have to fall victim to a data breach. Some privacy laws enforce fines simply for putting employee data at risk—for instance, by storing it without employees’ consent. This was infamously the case for retail giant H&M, which was fined €35.3 million for gathering ‘excessive’ information on staff and their families.

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Employee data privacy laws 

While data privacy laws in the US and the EU both protect personally identifying information, they bear several differences. Here are the most important privacy regulations that can impact your employees in both regions. 

US data privacy laws 

While you have the right to request, collect, and keep your employees’ data, you’re also responsible for securing their personally identifiable and sensitive information. Here are the most common US privacy laws to be aware of. 

General Data Protection Regulation (GDPR)

GDPR is arguably the world’s most stringent and impactful data privacy law. While it was enacted in the European Union, it applies to any organization or website that processes EU residents' and citizens’ data or sells goods or services to them. GDPR levies severe fines for violating data security and privacy, i.e., 4% of annual revenue or €20 million, whichever is higher. Data subjects can also make claims for compensation if their rights were violated under the law.

The regulation only applies to “personal data,” defined as information on those “who can be directly or indirectly identified.”These include:

Pseudonymous data might also be seen as “personal data” if it’s relatively easy to decipher one’s identity.

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How to ensure employee data security

Is there anything you can do as an employer to protect your employees’ data while staying compliant with local and federal regulations? Yes, there is! Here are some best practices that you can implement. 

Choose software with advanced security features 

While there are plenty of service providers to choose from, make sure to pick HR software that follows strict security standards. If in doubt, ask yourself the following questions:

Rippling complies with the most rigorous global data privacy and security frameworks, including SOC and ISO. It keeps your employees’ data safe at all times by offering strict access controls, data encryption, and server monitoring–from onboarding to offboarding. 

Create a data security policy and train employees 

Data breaches happen not only through hacker attacks; sometimes, they result from human mistakes or lack of policy. It’s important to create an internal playbook that specifies how everyone at your company is expected to handle employee data.

Make sure it covers:

To help your staff put this into practice, train them on your data privacy policies—well-trained staff are less likely to be tricked by cybersecurity criminals and reveal confidential company data. It can be helpful to create training materials and break them down into modules. Remember to update these materials regularly, as employee privacy laws are subject to change.

Whether training is mandatory depends on many factors, like where your organization and employees are located and what data privacy laws cover your employees (for example, HIPAA requires a covered organization to train all employees on how to handle private health information within a reasonable period of time after hiring). But even if training isn’t legally mandated, offering it to employees is still best practice.

Conduct security audits regularly

You should regularly check if your organization’s information system is secure by conducting a security audit at least once a year or more often, if possible. Your information system must be in compliance with both internal and external criteria. The former includes your company’s security policies and controls, while the latter revolves around government regulations like GDPR, Privacy Act, etc. 

A security audit should list any vulnerabilities and weaknesses, as well as recommend necessary actions you can take to make your system more secure. Remember that there is no universal way to run security audits; you can use different criteria and standards. Here are some common steps that you can take: 

Have a plan of action in case of a security breach

Despite your best efforts to protect data, sometimes a breach is unavoidable. Prepare an action plan ahead of time so you’re ready if it ever takes place. 

Start off by deciding who should be part of the response team and how they should be alerted. Know who is responsible for what and when.

The plan must also cover how you’re going to inform your employees and the wider public. Create templates for any internal and external announcements, such as those issued to internal team channels or the press.

It’s also a good idea to create a checklist of information the response team needs to gather to relay to employees, other stakeholders, and, eventually, the public. It can include the following:

A modern HR system that prioritizes data security 

Employee data is sensitive. That’s why Rippling combines enterprise-grade security features with regular audits so you can ensure your organization and employees are always protected. With Rippling, you can gather, store, and process your employees’ personal information without worry—Rippling is both SOC-compliant and ISO-certified, guaranteeing the highest level of protection. 

Rippling also offers: